Employers projecting salary increases of 2.9 per cent for 2016: Survey

Top performers to get 4.5 per cent
|hrreporter.com|Last Updated: 08/10/2015

Pay raises for Canadian employees are expected to improve slightly in 2016, according to a survey of 422 employers by Towers Watson.

Almost all respondents (98 per cent) are planning to give raisesnext year, with a projected increase of 2.9 per cent across all employee categories — a slight increase over last year.

“The number of companies that are giving raises has risen steadily since the recession in 2008 and budgeted increases for next year arenot much of a departure from what we have seen for a number of years. Since 2009 increases have typically hovered around three per cent,” said Sandra McLellan, North America practice leader, rewards, at Towers Watson.

“The story is not all about the numbers, however. While most organizations are finding the talent they need at current salary levels, we are seeing more employers prioritizing how their salary budgets are being spent,especially in light of their ongoing difficulty in attracting and retaining top performers or employees with critical skills.”

Employees who received the highest performance ratings were granted an average salary increase of 4.5 per cent this year, about 80 per cent larger than the 2.5 per cent increase given to workers receiving an average rating. Workers with below-average performance ratings received salary increases of less than one per cent.

“We’ve seen many companies make dramatic changes to their approach to performance management, including eliminating formal performance reviews or taking a ‘ratingless’ approach to reviews. Many organizations are rethinking whether linking base salary increases primarily to last year’sperformance makes sense or of this should be the role of short-term incentive and bonus programs,” said McLellan.

More employees are becoming eligible to receive annual and short-term incentives and more are also receiving awards, found the survey. Based on responses from employers with an annual performance program in place,more than four out of five (81 per cent) of professional and management employees received a bonus this year — up from 76 per cent last year.

It’s no longer all about base salary, said McLellan.

“Opportunities for career development, learning developmentand challenging work are top drivers of retention. It’s the value of the total package — compensation, benefits and non-monetary rewards — that makes the difference. As a result, companies are paying closer attention to understanding how employees value these elements.”

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